What happens next in the tax-cut standoff: Three scenarios

If the Bush-era tax cuts are going to be extended beyond Dec. 31, someone is going to have to blink.

Most political insiders believe it will be Speaker Nancy Pelosi (D-Calif.) and her House Democrats. Liberals who believe Obama caved to Republicans say there is no chance that Pelosi will bend.

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With an exception here and there, Obama and Pelosi worked well together to pass the stimulus, an overhaul of the nation’s healthcare system and Wall Street reform.

Now, they are clearly at odds.

Pelosi has been careful not to publicly criticize Obama for the tax deal, preferring to attack the GOP provisions in the pact that the president endorsed.

And the standoff between Obama and House Democrats is likely to intensify in the coming week. On Friday, the White House upped its pressure on skeptical House Democrats by touting former President Clinton’s endorsement of the tax accord.

Appearing with Obama, Clinton stressed that the compromise is the best deal Democrats can get.

There are many twists and turns the debate could take over the next week. For example, there has been chatter that the tax deal could be lumped into a continuing resolution or omnibus appropriations bill. Most think the appropriations and tax bills, however, will not be merged.

The following are the most likely three scenarios of how the tax policy dispute will play out in the final days of the 111th Congress.

Scenario No. 1: The Senate passes deal, the House amends the measure and sends it back to the upper chamber, which approves it. Obama signs it into law.

The pending tax cut compromise has the votes to pass both the Senate and the House. The Senate will act first and likely pass it fairly easily. But it can’t pass the House this month unless Pelosi brings it to a vote.

In a non-binding vote, the House Democrats this week emphatically stated they would not vote on the measure unless it is changed.

Rep. Brad Sherman (D-Calif.) said that type of vote — where the caucus instructs leadership how to address a bill — had never happened during his 14 years in the House. Pelosi, he pointed out, listens very closely to what her caucus wants.

Though Sherman said the bill can get a little better, Democrats know that if they don’t resolve the matter this month, the incoming GOP majority will make the deal “worse” early next year.

Clinton also made that point during his unusual press conference Friday at the White House, saying, “…the numbers will only get worse [next year] in terms of negotiating… .”

Many House Democrats want to change the estate tax and/or the unemployment provisions.

Tinkering with the accord’s stipulation on the estate tax could cause the entire deal to collapse, however, as could extending unemployment beyond the 13 months in the agreed-upon package could also blow it up.

Some Democrats are worried the proposed 13-month extension has no chance of being continued when Republicans control the House in the next Congress.

“If the economy does not improve substantially … and we are still are at nine percent unemployment in 13 months, what happens? Are we going to have to beg for unemployment insurance?” Rep. Elijah Cummings (D-Md.) told The Hill.

Pelosi knows she can’t change the deal too much or the revised measure will never get through the Senate. Her goal is to make changes that may not satisfy Senate conservatives, but will attract a few Republican votes.

“We don’t need 35 Republican senators [to vote yes],” Sherman said.

In many ways, this scenario would pit Pelosi versus Senate Minority Leader Mitch McConnell. The matchup favors the Kentucky Republican, who has shown throughout the Congress that he can unite his GOP colleagues.

Senate Majority Leader Harry Reid (D-Nev.) and the White House on Thursday night put some sweeteners for liberals in the bill. There is no indication, however, that those green-energy incentives have appeased Pelosi and her lieutenants.

During an appearance on MSNBC’s “Countdown” show Friday, Rep. Jay Inslee (D-Wash.) said, “We need to change it dramatically.”

If Pelosi is able to strike a new deal with the White House and it passes, it will represent a rare victory for House Democrats over the Senate. More than 400 House-passed bills are still awaiting action in the upper chamber.

Scenario No. 2: The Senate approves the deal, the House amends it, and gridlock ensues.

If Democrats change as much as a comma in the deal, congressional Republicans could walk away. It is especially noteworthy that some powerful players on the right, including Sarah Palin, Glenn Beck and Rush Limbaugh, are opposed to the plan.

Government scorekeepers say the bill costs $857.8 billion over 10 years, more than the 2009 stimulus.

That price tag could go higher if Democrats change the unemployment benefit provisions.

Should Democrats change the bill, Republicans could blame them and refuse to cooperate. Taxes would increase for everyone on Jan. 1 and likely create an enormous uproar across the country.

Like any high-profile issue, the tax debate has been highly partisan, but it would be very difficult for Obama to blame congressional Republicans if House Democrats do not pass his bill.

If the tax cuts expire, House Republicans would pass a new bill early in the 112th Congress while lambasting Democrats for hurting the economy.

In making his case for Obama’s proposal, Vice President Joe Biden told House Democrats to take it or leave it, indicating the pact would not be changed.

Pelosi and House Democrats would be weakening their president if this scenario played out. There would plenty of blame to go around, but much of it would be directed at the president as he and his advisers are game-planning his reelection bid.

Still, few think this scenario will play out.

Others are not so sure.

In part, Pelosi was elected by her caucus as minority leader to challenge deals Obama makes with the GOP. Some political observers contend House liberals, who lost their majority on Nov. 2, have the least to lose compared to Obama, Reid, McConnell and Speaker-designate John Boehner (R-Ohio).

Conversely, the repercussions of not acting could play out for years to come, with some saying House Democrats would cement their minority status.

Unlike healthcare reform, liberals point out that polls shows that a majority of voters do not support extending tax cuts for people making more than $250,000 a year. They contend this is a winning issue and where the party needs to make a stand.

Scenario No. 3: Senate passes the deal, House Democrats bend and agree to vote on the legislation, and it is signed into law.

Most aides, lawmakers and lobbyists believe this is the most probable scenario.

With time running out in the Congress, there is little time for bills to go back and forth between the House and Senate.

Democratic conservatives in the lower chamber who survived their reelection bids are frustrated with their leaders. They have criticized their actions on healthcare and climate change, and want the tax debate to be taken off the table – at least for the time being.

The left, ranging from MSNBC’s Rachel Maddow to former presidential candidate Ralph Nader, have ripped Obama.

Pelosi, who fought strongly for the public option in healthcare reform, could attract criticism if she bends to the wishes of the White House and Senate Democrats.

It would also set the tone for how Pelosi and her caucus are treated in the next Congress, where it is likely more compromises will be reached between Obama and congressional Republicans.

The difference between now and then is that Pelosi, at least for the moment, still holds the Speaker’s gavel.